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Tuesday, 12 February, 2002, 11:01 GMT
BP profits fall sharply
BP profits are falling despite a rise in output
Global oil giant BP has said its net profits almost halved in the last three months of 2001 compared with a year earlier.

The "general economic slowdown, and a sharp fall in oil and gas prices, certainly made for tough going", said chief executive Lord Browne.

Net profits fell 46% to $2.2bn (1.55bn) from $4.1bn during the last quarter of 2000.

Analysts had expected a fall to $2.09bn.

"We offset about half, actually over half, the impact of lower oil and gas prices by increasing the volumes primarily of our oil and gas production and reducing costs," BP Amoco's chief executive Sir John Browne told the BBC's World Business Report.

"We plan on prices much much lower than this. $16 and we balance the books," he added.

For the year as a whole, BP made $13.2bn in net profits, down from $14.2bn in 2000 despite a 5.5% increase in gas and oil production and cost reductions worth $800m.

Optimistic analysts

Nevertheless, BP remains the most profitable company in the UK.

And set alongside its peers in the energy sector, BP's growth prospects are good, analysts said.

BP's high reserve replacement ratio - which refers to its rapid replacement of oil and gas from existing fields with new reserves from newly discovered fields - is high for the industry.

And the firm BP is also better at meeting cost and production targets than its rivals, analysts said.

Last week, BP's rival, Shell, reported a fall in net profits to $1.9bn for the last quarter of 2001, down from $3.6bn a year earlier.

Bad environment

During the last quarter of 2001, BP's trading environment deteriorated in all its business areas, the company said.

Oil and gas production accounted for more than 75% of BP's profits.

Pressure on profit margins from sharply lower oil prices hit earnings from this division.

In addition, its gas and power division was hit by a 42% fall in net profits.

This division is especially active in the US natural gas market where high inventory levels are depressing prices.

Also, "significantly lower refining margins" hit earnings from BP's refining and marketing division.

While earnings from BP's chemicals division more than halved.

BP shares gained in early trading as investors' sentiment was buoyed by the strong rise in output which, coupled with rising oil prices, should boost its earnings in the future.

The strong replacement ratio also boosted investors' confidence.

By 1030 GMT, BP shares had gained 1.75% to 550p.

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 ON THIS STORY
BP Amaco's Lord Brown
"Demand is obviously lower this year"
See also:

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